Case Map for Eun/Resnick, International Financial Management, Fifth

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Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) This map was prepared by an experienced editor, not by a teaching professor. Faculty at Harvard Business School were not involved in analyzing the textbook or selecting the cases and articles. Every case map provides only a partial list of relevant items from HBS Publishing.

To explore alternatives, or for more information on the cases listed below, visit: http://www.hbsp.harvard.edu/educators Note: Items marked * were recommended by text co-author Bruce Resnick. Case Title, Authors Institution, HBSP Product Number, Length, Supplements/ Teaching Note availability Geographical and Industry Setting, Company Size, Time Frame Abstract, Subjects Chapter 1: Globalization and the Multinational Firm Creating the International Trade Organization David A. Moss ; George Appling ; Andrew Archer HBS 25p Product Number: 798057 N/A In the late 1940s, officials at the U.S.

State Department began campaigning for the creation of an International Trade Organization (ITO). This new organization would oversee global negotiations on trade liberalization, foreign direct investment, cartels, and commodity agreements; and it would complement the IMF and the World Bank, both of which were founded at the Bretton Woods Conference in 1944 to address international financial flows. Together, the IMF, the World Bank, and ... more. less.

the ITO would comprise a comprehensive system for the management of international economic affairs. As it turned out, however, the proposed ITO proved controversial both within the United States and around the world. Teaching Purpose: 1) introduce students to the vital and complex role of international institutions in the global economy; 2) expose students to the special difficulties and challenges that were associated with the creation of one particular international institution, the ITO; and 3) provide students with background on the evolution of trade relations and trade policy since the mid- nineteenth century. Subjects: Development banks; International finance; International relations; International trade; Trade policy Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) Economic Gains from Trade: Comparative Advantage (HBS Note) Robert E. Kennedy ; Nancy Koehn HBS 7p Product Number: 9-796-183 N/A How nations trade and whether they benefit from it are two of the oldest and most important questions in political economy. In the 170 years since David Ricardo formally developed the theory of comparative advantage, it has become one of the principles most widely accepted among professional economists. Despite this wide acceptance in the professional community, the basics of international trade are still poorly understood by many policy makers and casual commentators. This note introduces the theory of comparative advantage. It is divided into four sections. The first presents a short history of the concepts behind comparative advantage. The second develops a simple model with several examples to demonstrate the gains that result from trade between nations. The third briefly covers several extensions of the simple model. Finally, two traditional objections to free trade are reviewed. A rewritten version of an earlier note. Subjects: Business government relations; International trade; Macroeconomics; National competitiveness Note on Comparative Advantage David B. Yoffie ; John J. Coleman HBS6p Product Number: 9-387-023 N/A Discusses David Ricardo's theory of comparative advantage and the refinement of his model developed by Eli Heckscher and Bertil Ohlin. Presents several criticisms of the Heckscher-Ohlin theory, including Wassily Leontief's empirical demonstration that the nature of U.S. imports and exports were exactly contrary to the predictions of the theory. Subjects: Competition; Exports; Imports; International trade; Macroeconomics Chapter 2: International Monetary System The 1994-95 Mexican Peso Crisis * (HBS Note) Kenneth A. Froot Matthew McBrady HBS 25p Product Number: 9-296-056 Mexico Case Time Frame Start: 1994 Case Time Frame End: 1995 Explores the peso crisis of 1994-95 and why it occurred. Students are asked to examine Mexico's policies, the capital market's reactions, and the implications of devaluation for future capital flows and growth. Teaching Purpose: To discuss capital markets and their effects on exchange rates. Subjects: Capital markets; Foreign exchange rates; International finance; Mexico Collapse in Asia- -1997-98 * (HBS Note) George C. Lodge Anthony St. HBS 24p Product Number: 9-798-084 Asia Case Time Frame Start: 1997 Case Time Frame End: 1998 Discusses the Asian crisis and economists' opinions and solutions. Subjects: Asia; Economic conditions; International finance; Macroeconomics; Southeast Asia Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) George The Peregrine Debacle Michael J. Enright ; Vincent Mak U. of Hong Kong 25p Product Number: HKU168 Asia Industry Setting: investment banking Case Time Frame Start: 1998 Case Time Frame End: 1998 In January 1998, Peregrine Investments Holdings Ltd., once billed as "Asia's only indigenous investment bank," was forced into liquidation after the revelation of huge losses in its fixed-income business and the withdrawal of potential investors from Europe and the United States. Peregrine became the highest profile corporate failure in the Asian financial crisis to date. A firm that seemed to be on top of its world in early 1997 had collapsed under a pile of bad debts less than a year later. Peregrine's demise raised questions about how the firm might have avoided the debacle. This case can be used to teach corporate governance and strategy development in volatile environments. Subjects: Asia; International finance; Investment banking; Risk management Chapter 3: Balance of Payments Thailand in May and June of 1997 Hugo E.R. Uyterhoeven HBS 11p Product Number: 9-398-131 Thailand Case Time Frame Start: 1997 Case Time Frame End: 1997 Diagnose the economic situation, evaluate the available options, and recommend a course of action. Subjects: Balance of payments; Economic policy; Fiscal policy; Inflation; Monetary policy; Southeast Asia; Unemployment Kennedy and the Balance of Payments David B. Yoffie ; Jane K. Austin HBS 16p Product Number: 9-383-073 Exercises available TN available United States Case Time Frame Start: 1950 Case Time Frame End: 1960 In 1960, the United States was facing a balance of payments problem. Gold reserves were being drained, American products were losing competitiveness, and the dollar was under attack. This case analyzes the roots of this problem, provides an opportunity to discuss in depth balance of payments accounting, and allows students to explore various solutions to balance of payments difficulties. Subjects: Balance of payments; EC single market; Economic policy; International trade; Monetary policy; National competitiveness Cross-Border Lending by Citicorp in the 1980s Phillip A. Wellons HBS 13p Product Number: 9-381-146 TN available Multinational Industry Setting: banking Company Size: large Case Time Frame Start: 1979 Case Time Frame End: 1979 In September 1979, Citicorp must decide whether to continue to emphasize cross-border lending to countries around the world. The return on these loans, measured by the spread between the cost of funds and the borrower's payments, has narrowed during the last few years. What factors in the environment explain the narrowing spread? What is likely to happen if oil prices rise? What are the implications for Citicorp? What are the implications for the international economy? Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) Subjects: Balance of payments; Banking; Business conditions; Corporate strategy; Economic development; Financing; International banking; International finance Exchange Rate Policy at the Monetary Authority of Singapore Mihir A. Desai; Mark F. Veblen HBS 25p Product Number: 9-204-037 TN available Singapore Case Time Frame: 2001 Dr. Khor Hoe Ee, head of the Economics Department of the Monetary Authority of Singapore (MAS), is responsible for policy recommendations on Singapore 9s exchange rate regime. Singapore had experienced strong economic growth over the previous decades, during which the MAS carefully identified a target exchange rate range and employed a managed float policy toward the country 9s exchange rate. Now, Dr. Khor has to determine if this managed float policy remains consistent with the country 9s economic goals and if it remains practicable in the light of recent economic upheavals in the region, most notably the Asian financial crisis. The case examines how monetary and exchange rate policy is formulated and implemented, and describes how a central bank influences exchange rates. It provides a framework for understanding the economic determinants of exchange rates and explores exchange rate regime choice. Subjects: Current account; Capital account; Real and nominal exchange rates; Fixed and floating exchange rate regimes Chapter 4: Corporate Governance Around the World Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) The Hermitage Fund: Media and Corporate Governance in Russia Alexander Dyck HBS 24p Product Number: 9-703-010 TN available Russia Industry Setting: investment fund Gross Revenue: $200 million revenues Number of Employees: 50 Case Time Frame Start: 2002 William Browder, the top executive of the Hermitage Fund, the best-performing international equity fund over the last five years, attributed much of his funds' strong returns to its focus on shareholder activism and corporate governance. In 2001, he was putting this approach to the test by accusing the Russian oil and gas giant Gazprom and the international accounting firm Price Waterhouse Coopers of not stemming governance problems. Although the press provided extensive coverage of Gazprom's problems and the share price rose, Browder failed in his other efforts to get a board seat, and his lawsuits were dismissed. Was it time to refine or change this activist strategy? These were the questions Browder (and his investors) considered as he left on a long overdue vacation. Teaching Purpose: Illustrates the extent of corporate governance problems in firms, identifies mechanisms investors can use to address concerns about misgovernance, introduces the potential role of the media as a check on corporate governance problems and how firms can use this tool as part of their strategy, and explores the opportunities and risks to shareholder activism. Subjects: Corporate governance; Media relations; Russia; Strategy formulation Incentive Strategy II: Executive Compensation and Ownership Structure Brian Hall HBS 44p Product Number: 9-902-134 N/A Used in the course Coordination, Control, and Management of Organizations at the Harvard Business School. Analyzes incentive strategy from the perspective of a company's board of directors and owners. The focus is the role that executive compensation and ownership structure (the composition of, and financial structure between, a company's owners) play in motivating value- creating behavior. Teaching Purpose: To synthesize and summarize the course. Subjects: Corporate governance; Executive compensation; Incentives; Options; Stocks PetroChina: International Corporate Governance with Chinese Characteristics John Child Sang Xu ; Mary Ho U. of Hong Kong 20p Product Number: HKU183 China Industry Setting: petroleum Case Time Frame Start: 2000 PetroChina, the largest oil and gas company in China, was made a showcase for sound corporate governance in China's state-owned enterprises (SOEs). Its initial public offering (IPO) was part of the government's plan to lay the groundwork for other large capital-starved SOEs on the global capital market. In spite of the restructuring efforts, some analysts felt that the company was not yet close to where it needed to be in terms of Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) international governance standards. Teaching Purpose: To expose students to the range of issues relating to corporate governance with Chinese characteristics. In analyzing China's political and economic background and PetroChina's governance model, this case demonstrates that the corporate governance system in China offers limited protection for minority shareholders. Subjects: Business government relations; China; Corporate governance; Petroleum industry Corporate Renewal in America Bruce R. Scott Thomas S. Mondschean HBS 32p Product Number: 9-702-018 United States Case Time Frame Start: 1960 Case Time Frame End: 2001 Discusses various macroeconomic, regulatory, technological, and financial forces that led to increased corporate restructuring in the United States beginning in the mid-1980s. The U.S. financial system is often viewed as the most developed in the world and a model for other countries to follow. Similarly, the U.S. model of corporate governance--with its emphasis on shareholder value and an active market for corporate control--is also viewed as a model. Examines pressures for corporate restructuring and the emergence of an active market for corporate control for very large firms beginning in the early 1970s. Discusses the effects of this restructuring on corporate profitability and productivity. Provides data on the evolution of a number of indicators of performance, including productivity by sector, market capitalization relative to replacement cost, and rates of return both on assets and on equity. In brief, it finds that U.S. firms showed significantly improved after-tax returns on shareholder equity over the period while failing to make significant improvements on their pre-tax returns on assets--adjusted for the effects of the business cycle. Given the lack of comparable accounting data on returns across countries, conclusions about the performance of U.S. firms versus European ones isn't possible. Teaching Purpose: To compare and evaluate German, Japanese, and U.S. financial systems. Also, to discuss how a financial system like the United States' has been driven largely by market rather than policy forces. Subjects: Corporate Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) governance; Macroeconomics; Productivity; Profitability; Restructuring Sustainable Development and Socially Responsible Investing: ABB in 2000 Forest Reinhardt HBS 37p Product Number: 9-701-082 Switzerland Industry Setting: electrical equipment Gross Revenue: $25 billion revenues Number of Employees: 161,000 Case Time Frame Start: 1998 Case Time Frame End: 2000 Several investment firms and mutual funds position themselves as providers or facilitators of opportunities for socially responsible investment. This case addresses the impact of these firms on publicly traded companies. Focuses on managers at ABB, a large multinational based in Switzerland that has tried to be a leader in integrating principles of sustainable development into its business strategies. ABB's managers now need to decide what sorts of relationships they would like to have with the firms in the socially responsible investment community, and the extent to which they ought to take the preferences of these firms into account in tailoring their business strategies. Teaching Purpose: Understand the channels through which environmentally and socially "pro- active" behavior might be rewarded in the capital markets, and assess the likelihood that these rewards will actually materialize; understand the possible value propositions of firms that offer services relating to socially responsible investment. Subjects: Business & society; Corporate governance; Electric industries; Environmental protection; Ethics; International business; Manufacturing; Mutual funds; Social enterprise; Switzerland Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) The Board's Missing Link Cynthia A. Montgomery Rhonda Kaufman HBR Reprint 7p Product Number: r0303f The causes of many corporate governance problems lie well below the surface--specifically, in critical relationships that are not structured to support the players involved. In other words, the very foundation of the system is flawed. And unless we correct the structural problems, surface changes are unlikely to have a lasting impact. When shareholders, management, and the board of directors work together as a system, they provide a powerful set of checks and balances. But the relationship between shareholders and directors is fraught with weaknesses, undermining the entire system's equilibrium. As the authors explain, the exchange of information between these two players is poor. The authors suggest several ways to improve the relationship between shareholders and directors: Increase board accountability by recording individual directors' votes on key corporate resolutions, separate the positions of chairman and CEO, reinvigorate shareholders, and give boards funding to pay for outside experts who can provide perspective on crucial issues. Subjects: Board of directors; Corporate governance; Corporate responsibility; Shareholder relations Chapter 5: The Market for Foreign Exchange Capital Controls (HBS note) Rawi Abdelal ; Laura Alfaro HBS 6p Product Number: 9-702-082 N/A Only in the waning years of the 20th century did international financial markets begin to enjoy the freedom from government regulation that they had experienced before the first world war. By 2002, international capital markets had grown to be enormous--$1.2 trillion flowed around the globe per day. The massive size of the market presented policy makers with a serious challenge, as they were forced to grapple with the costs and benefits of such mobile capital. This note briefly relates the modern history of capital controls and summarizes scholarship on the advantages and disadvantages of international financial market regulation. Teaching Purpose: The advantages and disadvantages of international financial market regulation. Subjects: Business government relations; Economic development; Foreign exchange; Government policy; International banking; International finance; Policy making Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) Exchange Rate Exercise Robert E. Kennedy HBS 3p Product Number: 9-701-122 N/A Tests students' understanding of exchange rate analytics and how shifts in exchange rates affect firms' economics. Teaching Purpose: To reinforce exchange rate lessons. Subjects: Currency; Devaluation; Economic analysis; Emerging markets; Foreign exchange rates; International business Alphatec Electronics Pcl Stuart C. Gilson ; Perry L. Fagan ; C. Fritz Foley HBS 30p Product Number: 9-200-004 Thailand Industry Setting: semiconductors/high technology Gross Revenue: $250 million U.S. revenues Number of Employees: 20,000 Case Time Frame Start: 1997 Case Time Frame End: 1999 The newly appointed CEO of an important high- technology company in Thailand must lead the company through a complicated debt restructuring. Due to the collapse of the Thai currency, the company's debt burden, like that of most Thai companies, has skyrocketed because it has borrowed heavily in U.S. dollars. The new CEO, who is a U.S. citizen, must restructure the company under the recently revised, and largely untested, new Thai bankruptcy law. The new law allows troubled companies to reorganize their businesses following an approach that is similar, but not identical, to that practiced in the United States under Chapter 11 of the Bankruptcy Code. Teaching Purpose: Restructuring financially distressed companies in a non-U.S. setting, understanding the impact of dramatic exchange rate shocks on corporate valuation, and understanding the impact of legal rules and systems on corporate resource allocation. Subjects: Bankruptcy; Foreign exchange rates; Restructuring; Semiconductors; Southeast Asia; Valuation Note on Foreign Exchange* Scott P. Mason ; William B. Allen HBS 15p Product Number: 9-286-067 N/A Describes the operation of foreign exchange markets, including bid-offer spreads, cross rates, reciprocal rates, and forward rates. Provides several examples to demonstrate calculation of outright forward rates using discount and premium points quoted in the London Financial Times. Other examples demonstrate interest rate parity, and hedging foreign debt using long-dated forwards. Subjects: Capital markets; Currency; Foreign exchange; Hedging; Interest rates Note on Foreign Currency Swaps W. Carl Kester HBS 11p Product Number: 9-292-043 TN available N/A Provides descriptive background about the development of an international market for currency swaps and, by means of a detailed example, instructs readers in the determination of swap flows and all-in costs of financing using market swap rates. A rewritten version of an Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) earlier note. Subjects: Capital markets; Currency; Foreign exchange; Hedging; International banking; International finance Foreign Exchange Markets and Transactions Mihir A. Desai, Christina B. Pham, Katheleen Luchs, Yanjun Wang HBS 28p Product Number: 9- 205-016 TN available Global Case Time Frame: 2003 This note first describes the foreign exchange market and explains the basic calculations required to employ exchange rates, determine cross exchange rates, and measure currency depreciations and appreciations. The note then looks at forwards, futures, swaps and options and explores why firms use these derivative instruments. Finally, the note introduces some of the economic determinants of exchange rates, using examples to illustrate interest rate parity and purchasing power parity. The note includes a problem set so readers can practice and consolidate their understanding of exchange rates. Subjects: Economic determinants; Exchange rate transactions; Derivative instruments Chapter 6: International Parity Relationships and Forecasting Foreign Exchange Rates Note on Fundamental Parity Conditions* W. Carl Kester HBS 9p Product Number: 9-288-016 TN available N/A Provides a simple framework for analyzing expected exchange rate movements. Basic parity and equilibrium conditions are presented including purchasing power parity, forward parity, interest rate parity, the domestic Fisher effect, and the international Fisher effect (Fisher open). Empirical evidence about these conditions is discussed. References are provided. Subjects: Capital markets; Foreign exchange; Foreign exchange rates; International finance MSDI-Alcala de Henares, Spain Timothy A. Luehrman ; James J. Student HBS 6p Product Number: 9-289-029 TN available Spain Industry Setting: pharmaceuticals Company Size: Fortune 500 Case Time Frame Start: 1987 Case Time Frame End: 1987 Merck & Co., Inc. is evaluating a proposed cost- saving investment by its Spanish subsidiary. The case introduces techniques of discounted cash flow valuation analysis in a multicurrency setting. Can be used to teach basic international parity conditions as they relate to the value of operating cash flows. Subjects: Europe; Foreign exchange rates; International finance; Pharmaceuticals; Project evaluation; Securities analysis; Valuation Chapter 7: Futures and Options on Foreign Exchange Futures on the Mexican Peso* Kenneth A. Froot Matthew McBrady ; Mark Seasholes HBS 22p Product Number: 9-296-004 Mexico/United States Industry Setting: financial services Case Time Frame Start: 1995 Case The Chicago Mercantile Exchange needs to decide how to design, and whether and when to introduce, a futures contract on the Mexican peso. Subjects: Commodity markets; Country analysis; Foreign exchange rates; International finance; Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) Time Frame End: 1995 Mexico; Money; Money markets Chapter 8: Management of Transaction Exposure Note on Transaction and Translation Exposure * W. Carl Kester ; Richard P. Melnick HBS 10p Product Number: 9-288-017 TN available Describes the transaction and translation exposures that companies doing business internationally face when foreign exchange rates change. Also discusses how to measure and cover both types of exposure. Covering techniques are demonstrated using examples of forward cover, money market hedges, and options market hedges. Other covering devices, such as swaps and leads and lags, are also presented. Explains how these exposures relate to each other and what can be done to minimize overall foreign exchange risk. Subjects: Accounting procedures; Foreign exchange; Foreign exchange rates; International finance; Management accounting Metallgese llschaft AG David F. Hawkins ; Guy Weyns HBS 5p Product Number: 9-194-097 Germany Industry Setting: oil trading Gross Revenue: $7.2 billion DM Case Time Frame Start: 1993 Case Time Frame End: 1994 Metallgesellschaft AG is a commodity and engineering conglomerate based in Frankfurt am Main, Germany. Metallgesellschaft Corp., a New York based subsidiary of the group, has made oil trading and hedging errors that could drive the group into insolvency. The impact of hedge accounting rules on the quality of the information available to top management is examined. Teaching Purpose: To illustrate the fundamental issues in accounting for hedges and to show the tradeoffs that have to be made when choosing between deferral hedge accounting and mark-to- market-hedge accounting. Subjects: Accounting procedures; Conglomerates; Germany; Hedging; International finance N.V. Philips Electronics: Currency Hedging Policies Richard F. Meyer HBS 18p Product Number: 9-295-055 Finance Geographic Setting: Global Industry Setting: electronics Company Size: large Case Time Frame Start: 1990 Case Time Frame End: 1990 Describes Philips Electronics' policies and problems relating to foreign exchange risk and hedging. Explains centralization versus decentralization of currency hedging; economic role versus transaction role; the difficulties of capturing the necessary information centrally; and assigning currency gains and losses in a matrix system of management. Teaching Purpose: To show the problems of implementing a foreign currency hedging system in a very large, multi- divisional global corporation. Subjects: Currency; Electronics; Europe; Foreign exchange; Foreign exchange rates; Hedging; Risk management Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) Aspen Technology, Inc.: Currency Hedging Review Peter Tufano ; Cameron Poetzscher HBS 19p Product Number: 9-296-027 TN available New England/Global Industry Setting: software Company Size: small Gross Revenue: $57 million revenues Number of Employees: 417 Case Time Frame Start: 1995 Case Time Frame End: 1995 The chief financial officer of a rapidly-growing U.S.-based software firm that sells its process- control software to industrial users around the globe must review the goals, strategies, and policies of the firm's currency hedging program. This review is prompted by changes in the firm's business, notably its acquisition of a United Kingdom subsidiary, other growing overseas expenses, and its recent initial public offering. Teaching Purpose: Intended to allow students to analyze how a small, young firm's business strategy creates currency exposure and a need to manage this exposure. Designed to allow students to explore the goals and purposes of currency hedging, the measurement of exposures, and appropriate policies to be followed. Subjects: Foreign exchange; Hedging; Risk assessment; Risk management; Software Hedging Currency Risks at AIFS Mihir A. Desai; Vincent Dessain; Anders Sjöman HBS 17p Product Number: 9-205-026 TN available Global Industry Setting: Student travel services Case Time Frame: 2004 AIFS organizes academic and cultural exchanges for students, sending over 50,000 American students abroad each year for study programs and tours. Revenues are largely in U.S. dollars while costs are largely in euros. AIFS sets prices for the programs months in advance and guarantees its prices once they are published in its catalog. Every year, Controller Christopher Archer-Lock and CFO Becky Tabaczynski must decide whether to hedge a euro-dollar exposure before they know the magnitude of the exposure. They have to make hedging decisions well before the company knows how many students will sign up for its programs. Currency fluctuations and international crises can have a severe impact on sales volume. Archer- Lock and Tabaczynski have to quantify the exposure created by this mismatch in costs and revenues and/or different exchange rate scenarios and also want to explore the implications ofo using various mixes of forwards and options in their hedging strategy. Subject: Foreign exchange exposures; Hedging; Volume uncertainty Chapter 9: Management of Economic Exposure Note on Operating Exposure to Exchange-Rate Changes * Timothy A. HBS 11p Product Number: 9-288-018 TN available N/A Describes the effects on operating cash flows of a real change in exchange rates. Describes different elements of operating exposure and includes illustrative examples. Subjects: Currency; Foreign exchange rates; International finance; International operations Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) Luehrman Tiffany & Co.-- 1993* W. Carl Kester ; Kendall Backstrand HBS 12p Product Number: 9-295-047 TN available Global Industry Setting: retail jewelry Company Size: mid- size Gross Revenue: $500 million revenues Case Time Frame Start: 1993 Case Time Frame End: 1993 The restructuring of Tiffany's retailing agreement with Mitsukoshi Ltd. in 1993 exposed Tiffany to substantial yen/dollar exchange rate volatility that it had not previously faced. This new exposure requires Tiffany to establish risk management policies and practices. Management must determine whether to hedge, what the objective of hedging ought to be, how much exposure to cover, and what instruments to use. Teaching Objective: To introduce students to the problems of risk management in a relatively uncomplicated administrative situation. Subjects: Currency; Foreign exchange rates; Retailing; Risk management Universal Circuits, Inc. * Thomas R. Piper HBS 13p Product Number: 9-286-006 TN available United States Industry Setting: electronics Company Size: mid-size Gross Revenue: $200 million sales Case Time Frame Start: 1984 Case Time Frame End: 1984 The manager of international finance of a major U.S. electronics company is concerned about the exposure of the firm to changes in exchange rates. Of particular concern is the exposure of operations to changes in real exchange rates. The teaching objectives include: 1) understanding operating exposure and contractual exposure; 2) understanding the issues in estimating operating exposure; 3) understanding possible actions to neutralize operating exposure; and 4) assigning responsibility for the management of operating exposure. Subjects: Electronics; Financial management; Foreign exchange rates; International finance Ibersnacks, S.A. * Donald R. Lessard ; Ahmad Rahnema IESE 8p Product Number: IES017 TN available Spain Industry Setting: snack foods Case Time Frame Start: 1992 Case Time Frame End: 1992 Provides a framework for introducing the analysis of costs of financing for different currency choices. Allows for the measurement of the foreign exchange risk and its impact on the firm's financing costs as well as its operating margin. Also deals with the links between the firm's competitive position and its choice of financing. Teaching Purpose: Provides basis for discussion on the concept of economic exposure and describes how a domestic firm is exposed to foreign exchange risk. Subjects: Debt management; Europe; Financial analysis; Food; Foreign exchange; International finance; Risk Harley- Davidson, Inc.-- 1987 * HBS 18p Product United States Industry Setting: motorcycles After an LBO and near bankruptcy in the early 1980s, Harley-Davidson makes an astonishing recovery, going public in 1986. Its listing on the Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) W. Carl Kester ; Julia Morley Number: 9-292-082 Company Size: Fortune 500 Gross Revenue: $300 million revenues Case Time Frame Start: 1987 Case Time Frame End: 1987 New York Stock Exchange in 1987 provides the occasion of an equity analyst to publish a research report in which she must issue a buy, sell, or hold recommendation for Harley's stock. Complicating her analysis is the fact that Harley still faces vigorous Japanese competition and, therefore, has a significant operating exposure to the yen/dollar exchange rate. Stimulates discussion about operating exposure to real exchange rate changes. Subjects: Foreign exchange rates; International business; International finance; Motorcycles; Valuation Jaguar plc-- 1984* Timothy A. Luehrman ; William T. Schiano HBS 13p Product Number: 9-290-005 TN available United Kingdom Industry Setting: automobile Company Size: large Gross Revenue: $750 million sales Case Time Frame Start: 1984 Case Time Frame End: 1984 A vehicle for analyzing the exposure of operating cash flows to exchange rate changes. Considers the value of Jaguar plc at the time of its privatization and share offering in 1984. Jaguar is a major exporter from the United Kingdom and the United States is therefore exposed to changes in the dollar/sterling exchange rate. Students are asked to estimate the value of the company as a function of expected future exchange rates. Students may also be asked whether and how Jaguar's exposure should be hedged. Subjects: Automobiles; Foreign exchange rates; Industry analysis; International finance; Privatization; Stock offerings; Valuation Foreign Exchange Hedging Strategies at General Motors: Competitive Exposures Mihir A. Desai; Mark F. Veblen HBS 9p Product Number: 9-205-096 TN available Global Industry Setting: auto Case Time Frame: 2001 Eric Feldstein is responsible for managing foreign currency risks at General Motors. Currency exposures that arise from transactions in foreign currencies are mostly addressed by the company 9s corporate hedging policy. The company 9s hedging policy, however, does not address all of the risks that GM faces from changes in exchange rates. Although GM sells few cars in Japan, Feldstein perceives that GM has a significant competitive exposure to the yen. Feldstein reasons that an anticipated depreciation of the yen against the U.S. dollar would give Japanese automakers a sizable cost advantage relative to GM in the U.S. market, thus allowing them to take market share away from GM and other U.S. car makers. GM 9s competitive exposure to the yen is a long-standing strategic concern among GM executives, but discussions on what to do about it have been Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) largely hypothetical. As a consequence, Feldstein aims to develop an analytic framework to quantify GM 9s yen exposure to allow GM to better manage the risks that arise from this competitive exposure. Subjects: Competitive exposures; Financial consequences Chapter 10: Management of Translation Exposure Machinery International (A) David F. Hawkins HBS 6p Product Number: 9-100-012 B case available TN available United States Gross Revenue: $5 million Case Time Frame Start: 2000 Case Time Frame End: 2000 A U.S. company must decide how to translate its German subsidiary's DM financial statements into U.S. dollars for public and internal reporting purposes. Teaching Purpose: Explore financial and behavioral implications of different approaches to translation of financial statements from one currency to another. A rewritten version of an earlier case. Subjects: Accounting procedures; Currency; Financial accounting; Financial reporting; Germany; Machinery Foreign Exchange Hedging Strategies at General Motors: Transactional and Translational Exposures Mihir A. Desai; Mark F. Veblen HBS 24p Product Number: 9-205-095 TN available North and South America Industry Setting: auto Case Time Frame: 2001 The treasury team at General Motors (GM), headed by Eric Feldstein, is responsible for managing the corporation 9s varied financial transactions and their associated risks. With operations and subsidiaries all over the world, GM has exposure to numerous currencies. The company 9s hedging policy defines what exposures should be hedged and how the prescribed hedges should be implemented. GM 9s passive hedging strategy is intended to minimize management time and discretion spent on hedging decisions and does not usually accommodate hedging translational exposures. Exceptions to the hedging policy must be approved by Feldstein who is currently reviewing two much proposals for the Canadian dollar and the Argentinean peso. Feldstein and his team have to evaluate GM 9s exposure to each currency, determine the risks, consider other approaches to managing these currency risks, and decide if GM should depart from its formal hedging policy. If Feldstein does approve exceptional hedges for one or both of these currencies, he must also consider what instruments to use to implement the hedges. The two currencies pose different problems for General Motors. The firm has a large transactional exposure to the Canadian dollar, and a sizable translational exposure. Feldstein must determine Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) how fluctuations in the U.S. dollar/Canadian dollar exchange rate would impact GM 9s income statement, and also consider the longer term implications of the firm 9s exposure to the Canadian dollar. In effect, the GM policy does not regularly allow hedging of translational exposures but the CAD exposure is substantial enough to merit review. In the case of the Argentinean peso, Feldstein has to decide how GM should deal with the widely anticipated devaluation of the peso. Would it be cost-effective for GM to hedge more of its exposure, or are there other actions that GM might take to mitigate the effects of a peso devaluation? Subjects: Exchange rate risks; Hedging; Imminent devaluation Chapter 11: International Banking and Money Market CSFB's China Unicom Incident Michael J. Enright ; Vincent Mak U. of Hong Kong 20p Product Number: HKU187 China Industry Setting: investment banking Case Time Frame Start: 2001 Case Time Frame End: 2001 In August 2001, Credit Suisse First Boston (CSFB), a major international investment bank, was removed from the foreign underwriting team that would handle a pending share offering for China Unicom Group Ltd., the second largest telecommunications company in the Chinese Mainland. Only two months earlier, CSFB was designated to deal with the U.S. portion of that offering. However, after the bank hosted overseas investment "road shows" attended by senior government officials from Taiwan (including the finance minister), it was officially dropped from the China Unicom underwriter list. The incident provoked criticism from governments in the United States and Taiwan and widespread activity in investment banking circles as several other banks dropped plans to host road shows for Taiwan. Teaching Purpose: To teach how business decisions may become caught up in political difficulties and how companies need to formulate strategies and policies to address such issues. Subjects: Asia; Business government relations; China; International finance; Investment banking; Politics; Strategy formulation Malaysia: Capital and Control Rawi Abdelal ; Laura Alfaro HBS 31p Product Number: 9-702-040 Malaysia Industry Setting: government Case Time Frame Start: 1997 Case Time Frame End: 2002 On September 1, 1998 the government of Malaysia imposed currency and capital controls in response to the financial crisis that had swept Asia. The controls sparked an enormous controversy in the world of international finance. Some celebrated the controls for insulating the Malaysian economy from the unstable international financial system. Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) Others criticized the controls for trapping investors and allowing the government to protect the interests of "cronies." This debate also raised the central question about the future of the international financial architecture: What is the appropriate balance between financial market freedom and government discretion in the management of the global economy? Teaching Purpose: The political economy of capital controls in Malaysia during the Asian financial crisis. Subjects: Asia; Business government relations; Country analysis; Economic development; Emerging markets; Government policy; International banking; International finance Banca Bucuresti Debora Spar ; Laura Bures HBS 22p Product Number: 9-797-063 Romania/Greece Industry Setting: financial Case Time Frame Start: 1993 Case Time Frame End: 1996 In 1994, Greece's Alpha Credit Bank funded a new bank in Romania through its investment banking subsidiary, Alpha Finance. The Romanian bank, called the Banca Bucuresti (or Bank of Bucharest) became the first fully-licensed, foreign-owned bank in the country since the beginning of the post-Communist transition in 1990. As the Greek bank set up Romanian operations, Panagis Vourloumis, the venture's managing director, learned quickly the difficulties and risks of doing business in such an unstable economic environment. In 1996, after two years in Romania, he wondered whether to sell the bank and make money in the short term, or to take a longer-range view. Teaching Purpose: Describes the complex process of establishing a financial services business in a country without the basic institutions of market capitalism. Subjects: Banking; Developing countries; Eastern Europe; Financial services; International banking; International finance; International operations; Political process Korea First Bank (A) Yasheng Huang ; Kirsten J. O'Neil- Massaro HBS 26p Product Number: 9-701-022 Supplement available TN available Seoul, South Korea Industry Setting: banking Gross Revenue: $250 million revenues Number of Employees: 4,829 Case Time Frame Start: 1997 Case Time Frame End: 2000 In December 1999, Newbridge Capital, an equity investment fund based in San Francisco, successfully negotiated with the Korean government to acquire controlling interest in Korea First Bank. It was the first time ever a foreign financial institution acquired a Korean Bank. The negotiation was difficult and protracted, and the two sides tried hard to reach an agreement that would preserve the interests of both. The case examines the conditions and the motivations underlying one of the most significant acquisition deals in the Korean economy. Teaching Purpose: Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) To teach the complexities involved in an acquisition of a bank in a previously closed financial system. Subjects: Acquisitions; Financial institutions; Foreign investment; Globalization; Government policy; International banking; International business; Korea; Mergers European Monetary Union Richard H.K. Vietor ; Sabina Ciminero HBS 32p Product Number: 9-799-131 Supplement available TN available N/A On January 1, 1999, 11 European countries unified their currencies--48 years after their first integrative efforts. This marks a huge development in the structure of Europe and the world's economy. This case examines the integrative process, the Single Europe Act and its impact on market structure during the past 13 years, and monetary union. Provides data as of 1998 on European macroeconomics integration and data in the mid-1990s on integration of product markets, capital markets, and labor markets. Subjects: Business government relations; Competition; Currency; EC single market; Eurodollars; Europe; International business; Macroeconomics European Monetary Union: Honeywell Europe Richard H.K. Vietor ; Sabina Ciminero 4p Product Number: 9-799-151 N/A Supplements case listed above. Subjects: Business government relations; Competition; Currency; EC single market; Eurodollars; Europe; International business; Macroeconomics Chapter 12: International Bond Market Hutchison Whampoa Ltd.: The Capital Structure Decision Andrew Karolyi ; Larry Wynant ; Geoff Crum ; Peter Yuan Ivey School/UWO 26p Product Number: 99N021 TN available Hong Kong Industry Setting: investments Company Size: large Case Time Frame Start: 1996 Case Time Frame End: 1996 Hutchison Whampoa was considering strategies for its long-term capital structure. The HK$35 billion Hong Kong-based conglomerate had ambitious growth plans in multiple business sectors in different geographies. Traditionally, like many of its domestic peers, Hutchison had relied entirely on short- to medium-term bank loans. Its demand for long-term financing, attractive rates in other capital markets (especially the United States), and concern about a more diversified investor base had led Hutchison to explore other financing options. In particular, the company was debating the benefits of a Yankee Bond Offering. At the time, Hutchison had already approached Moody's and Standard & Poor's for a bond rating. Subjects: Capital budgeting; China; Financial strategy; International finance Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) European Bank for Reconstruction and Development: Marketing Strategy for the Debut Bond Offering Jeffrey F. Rayport HBS 23p Product Number: 9-594-005 TN available London/Eastern Europe Industry Setting: financial services/investment banking Case Time Frame Start: 1991 Case Time Frame End: 1991 The European Bank for Reconstruction and Development, the first supranational financial institution of the post-Cold War era, is planning its debut in the international capital markets through a bond issuance of $500 million. The bank must determine its marketing strategy for the offering on two levels--positioning of the institution and of the bond offering itself. Integral to the marketing task is the selection of a lead manager, who will determine the marketing mix. The mix decisions involve determining product (currency, maturity, coupon), pricing (yield), promotion (road shows and media relations), and distribution (formation of the syndicate). In addition, the lead manager will need to select appropriate target markets (retail and institutional investors), along with overall positioning for the institution. Subjects: Banking; Bonds; Eastern Europe; International banking; Investment banking; Marketing strategy; Pricing; Social Walt Disney Co.'s Yen Financing W. Carl Kester ; William B. Allen HBS 11p Product Number: 9-287-058 TN available United States Industry Setting: consumer/entertainm ent Company Size: large Gross Revenue: $1.7 billion sales Case Time Frame Start: 1985 Case Time Frame End: 1985 Walt Disney is considering hedging future yen inflows from Disney Tokyo. It is evaluating techniques using FX Forwards, swaps, and Yen term borrowings. Goldman Sachs presents a rather unusual but potentially attractive solution: Disney could issue ECU Eurobonds and swap into a Yen liability. The case explains how this alternative would work and suggests to the students ways to evaluate the hedging choices. Subjects: Bonds; Capital markets; Currency; Hedging; International finance Note on the Eurodollar Debt Market Scott P. Mason ; William B. Allen HBS 19p Product Number: 9-286-063 Describes the historical development of Eurodollar debt, with particular emphasis on fixed rate bonds and floating rate notes. Provides an analysis of issuers, investors and intermediaries. Subjects: Bonds; Capital markets; International banking; International finance Chapter 13: International Equity Markets Global Equity Markets: The Case of Royal HBS 19p Product N/A Royal Dutch and Shell common stocks are securities with linked cash flow, so that the ratio of their stock prices should be fixed. In fact, the ratio Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) Dutch and Shell* Kenneth A. Froot Andre F. Perold Number: 9-296-077 TN available is highly variable, moving with the markets where the securities are intensively traded. Royal Dutch trades more actively in the Netherlands and U.S. markets, whereas Shell trades more actively in the United States. The result is that the Royal Dutch/Shell relative price moves positively with the Netherlands and U.S. markets and negatively with the U.K. market. The ability to arbitrage these disparities and their causes are major case focal points. Teaching Purpose: To demonstrate how valuation is affected by the location of trade/ownership, and why arbitrage doesn't lead to integration of international financial markets. Subjects: Capital markets; International finance; Securities; Valuation Compania de Telefonos de Chile * W. Carl Kester ; Enrique Ostale ; Charles M. La Follette HBS 21p Product Number: 9-293-015 TN available Chile Industry Setting: telecommunications Company Size: mid- size Gross Revenue: $375 million revenues Number of Employees: 7,000 Case Time Frame Start: 1990 Case Time Frame End: 1990 The newly privatized Chilean telephone company, Compania de Telefonos de Chile (CTC) must raise substantial new funds externally in order to finance its expansion program. This task is complicated by Chile's small, illiquid capital markets and the skeptical view of Latin American borrowers held by investors outside of the region. CTC's chief financial officer must determine if listing American Depository Receipts (ADRs) on the New York Stock Exchange is a viable financing option for the company. Subjects: Capital markets; Equity financing; International finance; South America; Telecommunications Huaneng Power International, Inc.: Raising Capital in Global Markets * Steve R. Foerster Andrew Karolyi Jerry White Ivey/UWO 26p Product Number: 98N001 China Industry Setting: electric, gas and sanitary services Company Size: large Case Time Frame Start: 1994 Case Time Frame End: 1994 It is early October 1994, and Huaneng Power International (HPI), an independent power producer in the People's Republic of China (PRC), is in the process of executing a global equity issue to raise funds for the construction of new power plants. The company is planning to list the new shares through an American Depositary Receipt program on the New York Stock Exchange. The company has recently reduced the price of the issue due to poor market conditions and investor resistance to the price range stated in the preliminary prospectus. The student must decide, as HPI management, whether the new offer price and choice of listing exchange is reasonable in light of recent market events and the political, economic, social, and technological environment in the PRC. Subjects: China; Electric power; International Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) finance; Stock offerings; Valuation Chapter 14: Interest Rate and Currency Swaps Note on Foreign Currency Swaps* W. Carl Kester HBS 11p Product Number: 9-292-043 TN available N/A Provides descriptive background about the development of an international market for currency swaps and, by means of a detailed example, instructs readers in the determination of swap flows and all-in costs of financing using market swap rates. A rewritten version of an earlier note. Subjects: Capital markets; Currency; Foreign exchange; Hedging; International banking; International finance Gaz de France* W. Carl Kester ; William B. Allen HBS 19p Product Number: 9-288-030 TN available France Industry Setting: natural gas Company Size: large Gross Revenue: $8.5 billion revenues Case Time Frame Start: 1986 Case Time Frame End: 1986 The treasurer of Gaz de France is an aggressive, proactive manager of his company's liability structure, running one of the largest swap books of any non-financial corporation in the world. Currency futures, interbank forwards, and currency options are also frequently used to control the company's multi-currency liability structure. This case prompts students to explore the reasons and ramifications of such aggressive liability management, with particular attention being paid to the administrative challenges created by such a large swap position. An important decision has to be made regarding the management of the swap book in the face of the depreciating dollar, the decline of the franc against the German mark, and a possible realignment of the European Currency Unit. This is a comprehensive case involving swaps, debt policy, and foreign exchange exposure that is best taught after students have been introduced to these topics. Subjects: Debt management; Foreign exchange; France; International finance; Natural gas J.C. Penney (B)* Scott P. Mason ; William B. Allen HBS 23p Product Number: 9-286-118 TN available New York Industry Setting: retailing Company Size: large Gross Revenue: $13 billion sales Case Time Frame Start: 1985 Case Time Frame End: 1985 Penney's assistant treasurer was considering various capital markets issues to finance store modernizations. This case provides the financing terms available to Penney for domestic, current, and zero coupon debt. Eurodollar debt, and nondollar SFr and Yen issues hedged and swapped back to dollar liabilities. Also, Penney is considering using interest rate futures, options, and options on futures to hedge a forthcoming debt Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) issue. Subjects: Bonds; Capital markets; International finance R.J. Reynolds International Financing * W. Carl Kester ; William B. Allen HBS 14p Product Number: 9-287-057 United States Industry Setting: capital markets Company Size: Fortune 500 Gross Revenue: $13 billion sales Case Time Frame Start: 1985 Case Time Frame End: 1985 Reynolds must source a substantial portion of the financing of its Nabisco acquisition in offshore bond markets. Morgan Guaranty has proposed a yen/dollar dual currency Eurobond that could be hedged into dollars. This structure is compared to Eurodollar Bonds, Euroyen Bonds, and Euroyen Bonds swapped or hedged into dollars. Subjects: Bonds; Capital markets; Currency; Hedging; International finance Chapter 15: International Portfolio Investment Acer Computec Latino America Alberto Moel ; Markus F. Mullarkey HBS 13p Product Number: 9- 299-024 Mexico, United States Industry Setting: computers Gross Revenue: $323 million revenues Case Time Frame Start: 1996 Case Time Frame End: 1996 Acer Computer Latino America, a joint venture between leading Taiwanese computer manufacturer Acer and a group of Mexican and Chilean investors, was completing preparations for its long-awaited IPO in Mexico. The company had hoped to go public well before, but Mexico's 1994 devaluation had derailed the firm's offering. However, market conditions in Mexico were still unsettled, and in order to prevent a weak offering, the firm was considering including an American Depositary Receipt (ADR) issue in the offering plans. The case deals with the institutional context, costs, and benefits of an ADR issue, and with the strategic and tactical details involved in an ADR listing. Teaching Purpose: To introduce students to ADRs, and to present the issues involved in a cross-border initial public offering. Subjects: Capital markets; Computer industry; Financing; IPO; Joint ventures; Mexico; Underwriting Merrill Lynch's Acquisition of Mercury Asset Management Andre F. Perold ; Imran Ahmed ; Randy Altschuler HBS 29p Product Number: 9-299-005 Global Industry Setting: money management Case Time Frame Start: 1998 Case Time Frame End: 1998 In the Spring of 1998, Merrill Lynch faced an array of challenges and opportunities related to its global asset management business. The firm had recently completed its $5.3 billion cash acquisition of U.K.-based Mercury Asset Management. Merrill Lynch now would manage assets across the globe with a balanced mix of retail/institutional accounts, fixed income/equity assets, and domestic/international exposures. Provides an opportunity to analyze the future of the asset management industry from a global perspective, with emphasis on the changes occurring in Europe as it moves to a common currency, and on Japan, Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) which is undergoing a major reorganization of its financial system. Teaching Purpose: A vehicle for discussing 1) issues such as the phenomenon of home bias: Will investors diversify more broadly than at present, and what does this mean for the products and strategies of investment firms?, and 2) issues relating to branding, distribution, and production in a world where assets are increasingly coming under the control of individuals through the growth of self-directed retirement plans. Subjects: Acquisitions; Asset management; Investment management; Mutual funds; Pension funds Innocents Abroad: Currencies and International Stock Returns* Mihir A. Desai; Kathleen Luchs; Mark F. Veblen HBS 21p Product Number: 9-204-141 TN available To analyze this case, students need the case courseware (HBS 204- 705) Global Industry Setting: investment management Case Time Frame: 2004 Sandra Meyer, founder of the investment firm CapGlobal Advisors, LLC, has to present the case for international diversification to a skeptical client who is responsible for a state pension fund. Foreign equities have underperformed U.S. equities for some time, and the client wonders if the pension fund is losing out on potential returns by investing in international stock markets that are underperforming the U.S. market. Meyer plans to use data on international stock returns and currency movements to convince her client that international diversification does add value to the pension fund 9s equity portfolio and to demonstrate how currency movements influence international stock returns. Subjects: International portfolio diversification; Analyze large data sets; Home bias; Portfolio formation Chapter 16: Foreign Direct Investment and Cross- Border Acquisitions FDI in China Yasheng Huang HBS 28p Product Number: 9-701-061 TN available China Case Time Frame Start: 2000 Case Time Frame End: 2000 China is one of the most popular investment destinations in the world. Throughout much of the 1990s, China accounted for 50% of foreign direct investment (FDI) going into developing countries and between 1994 and 1997, China was the second largest recipient of FDI in the world, after the United States. The recent agreements between China on the one hand and the United States and the European Union on the other hand over China's accession into the World Trade Organization (WTO) may increase China's already impressive Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) FDI inflows significantly. This case examines the drivers of FDI flows into China and the lessons for other developing countries. Teaching Purpose: To teach students to think about FDI as a competitive process. Subjects: Business government relations; China; Foreign investment; Globalization; International trade; National competitiveness Financing the Mozal Project Benjamin C. Esty Fuaad A. Qureshi HBS 20p Product Number: 9-200-005 TN available Mozambique, Africa Industry Setting: aluminum/metals Gross Revenue: $500 million revenues Number of Employees: 900 Case Time Frame Start: 1997 Case Time Frame End: 1997 Opens in June 1997 with a team from the International Finance Corp. (IFC) recommending that the board approve a $120 million investment in a $1.4 billion aluminum smelter in Mozambique known as the Mozal project. Four factors make the investment controversial: it would be the IFC's largest investment in the world; total investment was almost the size of Mozambique's gross domestic project (GDP); Mozambique had only recently emerged from 20 years of civil war; and several key contractual issues were still undecided. Because commercial bankers have refused to finance the deal unless the IFC is involved, the sponsors have requested IFC participation. Whether the IFC's board will agree that it is the right time and the right place to make such a large investment remains to be seen. Teaching Purpose: Designed for people with an interest in capital investments in emerging markets. Presents an extreme example of political risk in a developing country and shows how project sponsors attempt to mitigate the risks through project selection, structuring, and insurance. Next, it highlights the contributions of multilateral development institutions in general, and the IFC in particular, in financing infrastructure projects. In particular, it analyzes IFC's involvement in appraising, structuring, monitoring, and financing infrastructure projects, and shows how these activities create value by resolving costly market imperfections including information, distress, agency, and transaction costs. Also explores the IFC's performance in each of its roles. Subjects: Africa; Aluminum; Capital investments; Developing countries; Emerging markets; Metals; Political risk; Project finance Case Map for Eun/Resnick, International Financial Management, Fifth Edition (Irwin/McGraw-Hill, 2009) Petrolera Zuata, Petrozuata C.A. * Benjamin C. Esty Mathew Mateo Millett HBS 22p Product Number: 9-299-012 TN available Venezuela Industry Setting: petroleum Gross Revenue: $77 billion revenues Number of Employees: 150,000 Case Time Frame Start: 1996 Case Time Frame End: 1997 Petrozuata is a proposed $2.5 billion oil-field development project in Venezuela. The project sponsors, Conoco, Inc. and PDVSA (Venezuela's natio

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